Emerald aisles: the changing way we shop
Ireland’s supermarket sector was shaken this week by the scrapping of the Superquinn brand and closures of Marks & Spencer stores. But the retail revolution is only starting
Word cloud: the words Irish people use most online when talking about supermarkets. The larger the type, the more often the word is used. Source: Olytico
Irish people hate to speak ill of the dead, so the lavish praise heaped on Superquinn this week when the final nail was hammered into its coffin was hardly surprising. It was also misplaced.
An aura surrounded the store in the 1970s and 1980s, but the fairy dust that Feargal Quinn, its founder, routinely sprinkled over his shops over the 45 years he was in control dried up long ago. The name had arguably passed its best-before date even before the Quinn family cashed in their chips, in 2005, for €429 million.
Nostalgia is well and good, but numbers don’t lie. Between 2007 – just before the recession kicked in – and April 2013, Superquinn’s sales figures were in sharp decline. It had a small bounce this spring, but its market share, at just over 5 per cent, is down more than a third from its peak.
It used to be so different. “When we moved to Blanchardstown, in the late 1970s, Superquinn was our saviour,” says one loyal long-term customer, Breega McGrath. “It was always a pleasure to shop there, and it always had an intimacy even though it was on the surface just another supermarket. They had the same people working there for years and years, and it was friendly – like shopping in a country town.
“But it all started to go wrong when Feargal sold it,” she says. “It was given a facelift by the new owners, but it was still awful, and the staff on the shop floor dwindled. You could never find anything, and there was never anyone around to show you where things had been moved to.”
The same story of falling standards and rising prices has been told by many other one-time Superquinn shoppers this week. The challenge facing the Musgrave Group, which is discontinuing the brand and bringing the shops under its SuperValu label early next year, is clear, but the company seems confident that it can halt this downward spiral.
SuperValu has grown by 30 per cent over the past 10 years and has retail sales of just over €2 billion. Now it has subsumed Superquinn, one in four Irish consumers will shop in SuperValu’s 222 stores; it has become the second-biggest player in food retailing, having leapfrogged over Dunnes Stores with the Superquinn takeover. It is the only one of the big seven retailers – Aldi, Dunnes, Lidl, Marks & Spencer, Superquinn, SuperValu and Tesco – with a quasi-franchise model, so its shops are more rooted in their communities than those of multinationals.
Last year SuperValu sold the equivalent of 95,000 cattle, 90,000 lambs and 12.5 million chickens – all of which were born, bred and reared in Ireland – worth €183 million. It also sold €156 million worth of Irish fruit and vegetables and €161 million worth of Irish dairy products. Each year its stores spend €75 million on products sourced from local suppliers, and individual retailers have the autonomy to put local products on their shelves.
According to its own analysis, every €1 spent in one of its stores generates 45c for the local economy. Just 15c is returned to the local economy from each €1 spent with a multinational.
“The grocery market here has gone through tremendous change, and the change has been even more dramatic as a result of the weak economy,” says Musgrave Group’s chief executive, Chris Martin. “There has been this big shift to value and price, but people also want real food, and they want real people behind the brand.”
Irishness is important
Irishness is undoubtedly important to Irish shoppers. Analysis by Olytico (see right) of social-media chatter between April and June this year shows that two of the most frequently used words among shoppers in nearly 20,000 posts on discussion forums and Twitter are “Ireland” and “Irish”.
“The irony is that it has taken the Germans to promote Irishness,” says Mark Fielding of the Irish Small and Medium Enterprises Association. “Aldi and Lidl have been pushing local goods and suppliers. People who go to Aldi and Lidl now have a feelgood factor because they are buying Irish.”
Stephen Wynne-Jones, editor of the retail magazine Checkout, agrees. “When it comes to advertising, Aldi and Lidl have been outspending all their rivals over the last two years, which is unexpected given their market share,” he says. “Aldi in particular has been able to get a message out about value, quality and Irishness, and that has delivered them a very loyal following.”
Just how loyal was revealed in a study by the retail think tank Verdict Research published in Checkout earlier this year. It found that Aldi had the most loyalty among Irish supermarket shoppers, with 43 per cent of its customers telling researchers there was “nowhere else they would prefer to shop” for groceries and other food. The second most loyal shoppers were Superquinn’s, with 34 per cent expressing undying loyalty. Loyal Marks & Spencer shoppers clocked in at 33 per cent. Shoppers at Tesco, the British retail giant, were the most fickle, with just over 25 per cent expressing fealty.
Loyalty aside, Tesco remains the largest player in the grocery sector, with a market share of 27.6 per cent – down from the 28.8 per cent it recorded over the same period last year. Dunnes has also seen its share fall, from 22.2 per cent last year to 21.5 per cent. SuperValu has seen footfall climb 0.1 per cent, to 19.5 per cent of the market.
But it is the success story of the Germans which is most interesting. When they entered the Irish market 10 years ago, Aldi and Lidl were regarded with suspicion. People turned up their noses at the discount chains’ unfamiliar brands and at the random assortment of special offers, which could feature anything from blowtorches and body contour suits one week to canoes and bouncy castles the next.
Over the past 12 months Aldi has seen its share of the Republic’s grocery spending jump from 5.4 per cent to 7 per cent. Lidl now commands 7.4 per cent of the market, up from 6.7 per cent last year.
The big shift in Irish shopping habits has more to do with the names on boxes than with names over doors. Over the past five years Irish consumers have woken up to own-brand products and realised they can be both very cheap and very good. We didn’t take to own-brand products when they first appeared on our shelves. When Quinnworth introduced its own-brand ranges in the early 1980s, with its unsightly packaging, the term “yellow pack” quickly became a euphemism for poor-quality jobs, products and lifestyles.
“Own-brand products have been boosted by the Germans, and they have worked really hard to change the consumer mindset,” says Wynne-Jones. “It is no longer perceived as being cheap and nasty, and most people consider it a viable alternative.”
In 2005 just 9 per cent of what we bought was own brand. This year it will make up nearly 40 per cent of the average shop – with the percentage climbing even higher in certain food categories. Although such growth is impressive, it is only the beginning. Chris Martin of Musgrave believes purchasing of own-brand products will reach 50-55 per cent, its current level in the UK.
Bad week for M&S
There is one own-brand retailer that has had a bad week. Just minutes before SuperValu made its big announcement on Wednesday, Marks & Spencer announced it was closing four of its stores in the Republic and making 180 people redundant. The four shops – in Mullingar, Tallaght, Dún Laoghaire and Naas – will close on August 17th, but Jonathan Glenister, head of M&S in Ireland, says it remains fully committed to Ireland.
“We have traded here for the last 35 years, employ around 2,800 people and have extraordinarily loyal Irish customers, but the past few years have been very challenging,” he says.
Stephen Wynne-Jones does not believe the M&S move means the company’s future here is threatened. “I think the closures are more a reflection of the individual locations than any serious problem,” he says. “Dún Laoghaire has become a bit of a ghost town, and all shops in Naas have been really badly hit by the opening of a massive Tesco on the outskirts of the town.”
It would be wrong to read too much into the closure. The retail business has always been in flux. Big players come and big players go, and consumers are always quick to move on.
With an online retail revolution only starting, the pace of change is going to get faster. None of the big seven should be taking anything for granted.